Is there a future for Labour and what will happen if they move to the right?

The Labour Party, as they reflect on their biggest loss in 92 years, is struggling to come to terms with the consequences of being environmentalists. No self-respecting westerner these days would say they weren’t concerned about the deteriorating environment. The threat of global warming is a massive wake-up call. Even the Rockefeller Fund founded on oil has just divested from coal and tar sands. Politicians finally have to face reconciling protecting the environment with creating the fiscal and monetary conditions for a thriving economy.

That is a huge challenge. The Greens can talk all they like about ‘smart growth’ and a ‘green economy’ but unless they address the money system and stop the growth imperative at is source 'smart growth' will just continue to be nice rhetoric.

9115760Over the last few years we have noticed the Labour Party aligning itself more and more with the Greens. But in the last weeks of the campaign Labour leader David Cunliffe actually stole the Greens rhetoric. He said, “It's got to be a clean, green, smart, strong economy” (14 Sept, Stuff)

So while Labour has moved towards the Greens, for strategic purposes it had also to distance itself from them right at the beginning of the campaign. Doing the splits eh? Electoral realities dictated that it could no longer afford to align itself with a party who questioned every job creation initiative the National Government started. But there is a large faction in the Labour Party that wants expressways, deep sea oil drilling, mining in conservation areas and fracking – all for the sake of jobs.

But Labour’s resounding defeat in the 2014 election should really be seen in the international context. Labour Parties and Social Democrat parties are struggling all over the western world – in Australia, UK and Canada and even Sweden they are losing ground. Cunliffe hasn’t got it on his own. All social democrat parties are struggling to reconcile protection of the environment with the economy so voters just cast their lot with the conservatives who promise “economic growth” (no matter what kind of growth). IN the case of New Zealand you can add in a personable Prime Minister with the common touch, a Leader of the Opposition who is prone to lecture and the challenge is almost insuperable.

The price of West Texas oil on 23 Sept 2014 was $91.50 and Brent Crude was $97, due to falling demand. But it is costing $100 a barrel these days to produce “tight oil”, the sort that is costly and difficult to extract. As Richard Heinberg recently wrote “Extracting and delivering those resources at an affordable price is becoming a bigger challenge year by year.” We have the perfect storm of peak resources, climate change and economic instability and no Labour Party is has the facility to deal with them. Moreoever it is no good reminiscing about the great days of Micky Savage, Norman Kirk or David Lange. The Labour Party now has a huge leap to take to adapt to the real world of 2014.

While the Greens move towards the middle, the Labour Party probably has to move to the right for electoral purposes. With so many environmentalists in the party these days they are damned if they align with the Greens and damned if they don’t. The alternative is for the Greens to move over and let Labour occupy more of their territory.

The challenge requires much more than bandaid solutions of Kiwibuild, raising minimum wages and Working for Families. It requires the complete rethinking the political economy, one which works for a post fossil fuel age.

Over the last three years the New Economics Party has been doing this and we have come up with some proposals. We believe it requires a massive change to the tax system and fundamental currency reform so that we get public creation of money with strict inflation control. Furthermore it requires recognising we live in the age of automation so a Universal Basic Income must replace our welfare system. The Labour Party has been talking jobs, jobs and jobs. But it is more realistic to talk of having enough money and enough choices. Only a Basic Income will emancipate the welfare system, improve working conditions and provide a real incentive to work.

As Michael Bauwens, Founder of the p2p (peer to peer) Foundation said “any movement dependent on labour and the power of labour is futile, because labour is disappearing.” They are stuck in a Cold War narrative and have no stories for the future. The workforce has also been casualised as employees are made redundant. Many of them set up a small consultancy. The trend continues. Labour is bleeding and becoming freelanced.

Is the future 3D printers in microfactories in small towns ?

Is the future 3D printers in microfactories in small towns ?

There is another factor. According to economic historian Philip Mirowski the left doesn’t understand neoliberalism. When they don’t understand it, they underestimate the cleverness of their foe and simply cannot counter it. Neoliberalism has re-engineered society. We need to tackle Capital in a different way, by disempowering it through the empowerment of people. Through real democracy, through new technology allowing real people to own the means of energy and production. Maybe this is 3D printers in microfactories in small towns with a local bank. Many on the right will get on board with that.

Perhaps we have to write Labour off and accept they are not a movement of the future. Do they really have to move into National’s space to better “play the game”? Well, it’s not a game, it’s about survival and it’s about now. Fewer and fewer people will vote. Labour will be seen as a weak ineffectual version of National. And if the Greens continue to sing from Labour’s songbook, they’ll likely stay at 10% too. The more they try and portray themselves as CEOs the further they will lag behind the international Greens movement.

However, given the fact that the Labour Party is unlikely to adopt either the massive currency reform, tax reform and welfare reform required for a redesign of the political economy, it may either continue to thrash itself to death or stagger on as a less environmental party. Neither option is good. The challenges of the post fossil fuel age will indeed be very hard on social democracy parties with a proud history.

by Deirdre Kent and Aaron McLean

Two major blindspots in David Cunliffe interview so the Labour policy won’t deliver jobs.

It was with considerable interest that I spent half an hour watching the streamed online broadcast from thedailyblog recently. Bomber Bradbury and Selwyn Manning were interviewing the new Labour leader David Cunliffe.

For a while I was very excited. Here was a man who was head and shoulders above his predecessor. His replies showed his high intelligence, considerable knowledge and a lot of political wisdom. Yes he would come down hard on tax evasion, he would reform the trust law, focus on exports and jobs. He showed he had a very good grasp of climate change, talked about extreme weather events and said there must be a price on carbon. When asked about the meltdown of unregulated financial markets it was clear he knew about Consolidated Debt Obligations and explained how the world came to be awash with phony debt. He wanted re-regulation of financial markets and described the kiwi dollar being a “speculative plaything of international markets.” He said nobody ever gets pinged for trading the NZD but it drives up the dollar and is bad for exporters.

Asked about FTT he said “If you hear a giant sucking noise it will be overseas money leaving New Zealand”, that will be the global capital would leave in a rush. He said in a borderless and internet-enabled world economy a financial transaction tax has to be imposed by the whole global community rather than going it alone. Interesting.

On the TPPA he wants the text released so we can have a mature public debate. How refreshing that was. He was good on the GSCB and showed a lot of insight on our role in the Pacific.

Like a good Labour Party stalwart he advocated a living wage, raising the minimum wage and said that Labour was working on fine tuning Working for Families so that all children benefit.

But there were two questions which put a halt to any thought he might be the saviour of New Zealand. When asked “Would you find yourself in a position to reduce GST if you are putting up the top income tax rate?” the answer was “I hate to disappoint you but no” he said it would take five years to get the Capital Gains Tax to the stage where it raised revenue, and with all the programmes they wanted to introduce, the Crown balance sheets would be stretched thin. Well this is a huge slap in the face to working poor to keep GST, the most regressive tax of all.

So I looked up Capital Gains Tax and found most countries have it in some form. Wikipedia gives good information. Oh yes there are a few like us who don’t have it, Jamaica, Kenya and Singapore being three of them. But most countries have it in some form or other. It is sending the right signal to property investors. Australia’s and Canada’s seem similar and I guess the Labour Party is modelling theirs on Australia’s. That means they get the capital gain, divide it by two, and apply the marginal tax rate to it, which is 43%. So here we are, all these properties rise in value in Auckland 18% a year. If you sold a rental and made a capital gain of a mere $100,000 you would pay 43% of $50,000 or $21,500 in CGT. The other $78,500 you can keep for yourself. Nice. That is rightly public money, as it is society which creates the extra value on land. The whole of it should be publicly captured.

And if you sell your home and make $300,000 don’t worry you won’t have to pay a cent of that to society. So for just investment properties (and commercial and industrial properties?) you will pay 21.5% back to society and capture the rest yourself.

Capital Gains Tax in its present form doesn’t stop at gains on property. Several websites go into it at length and one is left with two impressions. The first is that there is apparently no apparent understanding of the difference in genre of land and its gifts and capital. Land and capital are collapsed together. One is a gift of Nature and one is the combination of labour and resources.

The second impression is that CGT is so complex that it will be extremely expensive to administer. Already the Inland Revenue Department has to spend $1 billion over the next ten years upgrading its IT systems and CGT will make it worse.

Neither Bomber Bradbury nor Selwyn Manning asked him exactly how he would ensure that jobs were created. And of course jobs can’t be created under this scenario. The CGT is weak and relatively ineffective and the progressive tax means that the tax burden is greater. A currency overburdened by tax and issued by private banks as interest bearing debt will surely not circulate fast enough into productive enterprise.

Only when there is a working moving currency will jobs be created. And the currency must be relieved of its burdensome and illogical taxes on work and enterprise. A lack of awareness of currency theory, linked with a lack of understanding of the difference between the gifts of Nature and the work of humans are two important blindspots. Until then wealth will continue to accumulate with private banks and landowners. It is disappointing that policy shaping up to be about redistribution, rather than creation of wealth. It is so much more important to understand the role of currency design than to artificially prop up wages. Currencies can be designed to be abundant and flow, rather than pool with the wealthy.

So are we to see a Labour Government that showed much promise yet failed to deliver on jobs? Of course. Expensive social welfare programmes, a complicated and burdensome tax regime with a very regressive GST and a money system which perpetuates the status quo will see to that. The tax avoidance industry will have a heyday. Sadly I forecast the only jobs that will be created are jobs as accountants, tax lawyers, WINZ and IT specialists in the Inland Revenue Department.